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I'm a 21 year old programmer, currently back in school part time after taking a semester off to work.

I've been able to save $400 every 2 weeks during the past several months and that's left me, on top of my previous savings, with around $13,000.

I'm currently with Investors Group in a mutual fund of about 75% bonds and about 25% equity. I have two funds there, one no-load with $11,000 and another with about $2,400 but a DSC of 4.5% declining over 7 years. I stopped contributing to the DSC fund as I prepare to take control of my own finances. These funds also have an MER of approximately 2.5%.

My plan is to open an e-Series account at TD and invest my money according to the Canadian Couch Potato strategy. (You can't blame me, what with all the fees attached to the IG funds, I'm seeing about a 2% return after all is said and done, where the CCP had a return of about 8.5% last year. )

My question is this: I'm planning to take a trip to Europe this summer for which I would budget around $5,000-$7,000. This money will have to come out of the $13,000 I have saved. When moving my money from my IG accounts to the eSeries, what would be the most useful, safest distribution of money so I can capitalize on putting more of my money into equity, while ensuring that come summer I can comfortably take out the 5-7k without taking a loss?

Similarly, while I'd like to place as much money as possible into equity,since I'm working with a very very long time horizon to retirement, I'd also need to plan for things like buying a house, or paying rent, etc. is the best way to do this simply to place more of my money into bonds instead of stocks, as they're safer, while having lower returns? Can my emergency fund be placed into bonds, or is that better off in a regular high yield savings account (ING?)

I also have yet to do the math on whether it would be most advantageous to just pay the DSC on my IG fund now, and have that money gain more interest in the eSeries, or whether I should let it sit in the IG now and take it out at a later date when the DSC won't hit so hard. What is the word / type of calculation I should do to compare the end results of these approaches?

Thanks for the responses everyone! And I'm glad to see this sub getting more attention lately!

You need to differentiate your long term (retirement) savings and your short to medium term savings (trip, rent, downpayment, etc.)

Your long term savings should be in a portfolio made up of a large portion of equities with some portion of bonds given your age (ex. 75% equities, 25% bonds). These should have a time horizon of 15+ years.

Your medium term savings can be in a high interest savings account or bonds. I prefer to keep my emergency fund in a high interest savings account as it is very readily available (a matter of minutes really). The interest I miss out on compared to bonds doesn't really bother me considering the balance of that account.

Any money that you are planning to use in the short term (ie. the 5-7k for a trip) should NOT be invested in equities at all as equities are volatile and there is no way to guarantee you wont have a loss in the short term.

I also have yet to do the math on whether it would be most advantageous to just pay the DSC on my IG fund now, and have that money gain more interest in the eSeries, or whether I should let it sit in the IG now and take it out at a later date when the DSC won't hit so hard. What is the word / type of calculation I should do to compare the end results of these approaches?

Considering the eSeries should get YOU higher returns (due to the lower fees) You need to bust out Excel and figure out how long it takes for those higher returns to outweigh the DSC fee. This really depends on the balance and asset allocation as well as you will have to estimate average returns on this account.

I figured my short term savings should be in either bonds or a high interest savings account. Which brand of saving account do you use? And if I were instead to keep it in bonds for the higher return, to take it out would only take maximum a day or so, given that I can effectuate the trade through the eSeries myself, correct?

And so I guess the calculation would be to find the penalty ill pay taking it out, and how long it'll take in the new account to overcome that deficit (including the possible charge of closing my IG account all together)

I figured my short term savings should be in either bonds or a high interest savings account. Which brand of saving account do you use? And if I were instead to keep it in bonds for the higher return, to take it out would only take maximum a day or so, given that I can effectuate the trade through the eSeries myself, correct?
My High-Interest Savings account is through RBC at 1.2%. Not currently the highest available between all the banks but it offers convenience for me which makes up for the small amount of lost interest.

Bond prices tend to move in opposite direction of interest rates. The movement in price is more pronounced with the longer duration bonds. For example, if interest rates are rising, your long-term bond funds will typically lose more value than your intermediate and short-term bond funds. Who wants to hold the old bonds that pay lower rates of interest when the newer ones pay higher interest?
from here
Basically, bonds are different than bond funds. Within a bond fund, bonds are trading similar to a stock fund. When interest rates rise, the relative return of older, lower interest bonds isn't as great a newer bonds therefore their value drops and vice versa.